ONE Gas, Inc.’s (OGS - Free Report) regulated earnings, steady demand from residential customers, new rates and systematic capital expenditure will drive performance.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) utility company a promising investment pick for now.
Earnings Surprise & Price Performance
The company has a trailing four-quarter positive earnings surprise of 2.45%, on average.
In the past month, shares of ONE Gas have gained 6.3% compared with the industry’s growth of 4.1%.
The Zacks Consensus Estimate for the company’s 2019 earnings per share is pegged at $3.50 on revenues of $1.67 billion. The bottom and top lines are expected to rise year over year, which indicate an increase of 7.69% and 2.35%, respectively, from the year-ago reported figures.
The consensus mark for 2020 earnings is pegged at $3.65 per share on revenues of $1.75 billion. While the bottom-line estimate suggests a 4.74% year-over-year increase, that for the top line implies a 4.51% improvement.
The company’s long-term (three to five years) earnings growth is pegged at 6%.
Long-Term Investment Plans
ONE Gas has a strong long-term capital expenditure plan, with $450-$500 million anticipated to be spent every year over the 2020-2023 time period. The company plans to invest $450 million in 2019. Roughly, it intends to invest $2.4 billion over the next five years to strengthen and expand existing operations. Owing to consistent investment in operations, the company’s rate base is expected to improve 6-7% per year, on average, between 2018 and 2023.
Regular investment in a fully-regulated company and its ability to generate sufficient cash flows will support management’s plans for rewarding shareholders through average annual dividend increase of 7-9% in the 2018-2023 time period. The targeted dividend payout ratio of the company is 55-65% of net income.
The current dividend yield of the company is 2.13% versus the Zacks S&P 500 composite’s average of 1.79%.
Other Stocks to Consider
A few other top-ranked stocks in the sector are FirstEnergy Corporation (FE - Free Report) , Atmos Energy Corporation (ATO - Free Report) and MDU Resources Group, Inc (MDU - Free Report) . All the stocks currently have a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FirstEnergy, Atmos Energy and MDU Resources delivered a positive earnings surprise of 2.87%, 3.18% and 2.79%, on average, respectively, in the last four quarters.
Long-term earnings growth rate for FirstEnergy, Atmos Energy and MDU Resources is pegged at 6%, 7.20% and 7.10%, respectively.
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